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Management Only Understands the Language of Money

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Management Only Understands the Language of Money

The Language of Management

Convert the language of things to the language of money.

I was introduced to the above truism by the late Joseph Juran. As a fledgling quality practitioner, I was the recipient of a great deal of training under Dr. Juran. The language of money has stuck with me through the years and I always look to convert the language of things to the language of money when working on a business solution. In the course of solving business problems, I have concluded that there is no such thing as a non-financial metric.

Let me relate a real-life event to you. Early in my career I was a plant manager of an adhesives manufacturing facility. One day I received a call from the corporate purchasing manager asking me to take delivery of 2000 gallons of resin because he was able to purchase it at a discounted price saving the company $1000.00. I resisted, telling the purchasing manager the storage tank where this resin was housed was full and my only alternative was to pump the resin in drums. The purchasing manager pleaded his case to my boss, the director of operations, and won despite all my protestations.

I lost because I was talking in the language of things, filling the resin in drums, disposing of the empty drums, and the additional labor to handle the drums and so on. If had converted the language of things to the language of money my costs for taking the resin were $3500.00 (cost of the new drums, disposal of the empty drums, and labor costs for handling the drums) far more than what the potential savings attributed to the purchasing manager.

What we have are a lot of financial metrics, and a lot of other things that are equally financial, only our accounting folks haven’t figured out how they relate to money.  Make no mistake, however.  Things like on time delivery, employee turnover, cycle times, quality results and all of the rest are very much financial.  If they had no impact on sales or costs no one would care about them.

The big problem isn’t that we haven’t figured out how to dollarize them.  No, the problem is a belief in many organizations and among many managers that, if we can’t dollarize them, they can’t be as important.  In too many companies, numbers without dollar signs in front of them aren’t viewed as bearing the same weight as those that do have them.

We cannot calculate the precise financial impact of changes in employee turnover rates, non-value-added work, the total cost of poor quality, or fluctuations in delivery performance, so we assume it must not be as important as concise cost figures.  Too often, proposals to improve performance to these critical things accounting should know how to dollarize but doesn’t are shot down because the people proposing the improvement cannot do accounting’s job for them – that is to devise ways to determine a financial return from improving these measures.

Shame on us who play along with this thinking.  The existence of critical non-financial metrics is merely proof that we have more work to do converting the language of things to the language of money, but certainly not proof that these things are not critical drivers of financial results.

Willie Carter has nearly four decades of continuous improvement experience, which have enabled him be a good listener, teacher, coach and leader as he helps organizations do more with less and become more agile. In addition to his consulting practice, he is on the adjunct faculty at Roosevelt University, Chicago, IL.

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